Ellen Meade spent 25 years at the Federal Reserve in key roles at the Board of Governors interspersed with 12 years in academia, the path she continues on now as a research professor in economics at Duke University.
Importantly, Ellen’s work in her second stint at the Fed Board in D.C. puts her in the spotlight as the Fed completes the second-ever review of its monetary policy framework agreement. In 2018, during the decade from 2011 to 2021, she worked primarily on monetary policy and communications. She was appointed to be Special Adviser to the Fed Board of Governors and then worked with Vice Chair Richard Clarida, as well as being Senior Adviser in the Division of Monetary Affairs. Ellen participated in work on the Fed’s second Framework agreement, which is now being revised.
Bottom line, one could say she knows the Federal Reserve Board inside and out; having been a senior economist and economist on staff of the Federal Reserve Board of Governors (1984-94, 1995-99).
Which leads us to another story that has hit the Fed, and especially Chair Jay Powell, harder than anything that has come from criticisms of the Fed’s first framework review in 2020.
This is the renovation of the Eccles building that has housed the Fed’s main offices for many years and two more buildings that are under renovation to consolidate a growing Fed staff. The project that includes underground parking garages, according to the most recent estimates, will now cost $3.1 billion. This renovation project has put Powell on the hot seat and created that on-site construction project meeting with President Trump that became a media spectacle. That meeting since has seemed to diffuse the conflict. I interviewed Ellen on these matters late in July, before much of this Trump-Powell drama had fully unfolded.
As someone who worked in this building, Ellen has firsthand knowledge of its condition. She sees a clear need for the renovations that have been undertaken. As for the eye-popping cost of the project, she says at the very least the optics are bad
So dive in and hear what she has to say, and how and why she sees the administration leaping on this to pressure Chair Powell on policy, or to force him out of office, is a dangerous action. And why this would strike a low blow to Fed policy independence
Trump looking for leverage on Powell 00:02:25.050
I think it's a late breaking attempt to be able to either threaten Powell or remove him for dereliction of duty, malfeasance, inefficiency, the kinds of things that are unrelated to monetary policy that they actually could remove him. For you know, the Supreme Court in the Wilcox decision was very clear that they're going to keep the fed independent with respect to monetary policy. So if they, if they want to remove Powell, they have to go after something else, and it seems like they've latched onto this as a way to maybe do that.
Some in the administration think they have the ultimate leverage 00:03:41.250
Yeah, I think this is one of the most interesting angles on this issue. We had the letter from Russell Vought, of the OMB to Chair Powell last end of last week, requesting answers to a lot of questions with a clear sense in this letter that they feel that Chair Powell lied during his Congressional testimony. and they've reappointed or appointed new members to the National Capital Planning Commission to review changes to the Fed's plans as if they're sort of getting ready with the army to come in and fire him. But, on the other hand, you know, what would that mean for markets? Well, that would be terrible for the independence of the Fed.
Great danger in dismissing Powell…do they know? 00:04:26.750
Even if it isn't a firing related to monetary policy. Long-term rates could spike investors could flee US assets, and it could be very, very costly for the United States, both in credibility and in financing terms. I think Bessent understands that very, very well, so does Kevin Hassett. They have been, I think, fighting the fight within the Trump administration to retain the President's trust, but at the same time they're mindful of these concerns. I don't think Vought comes from that place. I don't think he understands the implications of what they might be doing, and he just wants to deliver to the President what the President wants now, this offer, or whatever it was that Bessent made today on Bloomberg. kind of suggests that. Well, if Powell would agree to leave go peacefully when his term expires, as Chair next May. Then then maybe they would pull back on this, at least, that was sort of implicit in the suggestion. I have no idea whether that's broadly supported or not.
Object: consolidation 00:06:07.930
Well, there are a lot of documents posted on the National Capital Planning Commission's website, starting back in 2019, when the Fed 1st presented plans for this, and then a plan was finalized in 2021. And so you can see all the various plans there. But you know it's quite a large undertaking. The Fed over the years, has acquired additional office space around town, bought some, but then it mostly leased space and other buildings, and the staff are spread out. And so the idea, when you know there are two buildings there at 20th and C Street. One of them has recently been renovated and staff are in it, and the other is this Eccles Building, the original 1933. I think it was Eccles Building, and then next door was a building that the Fed purchased some years ago. It's in horrific shape, a lot of disrepair, but the idea was to renovate it, and then they could bring everybody back in the same location. Get rid of the lease space, and they'd be, you know, be all consolidated. Now the problem is that the building next door, I think, was built between 1931 and 33.
Expensive to renovate an old building 00:07:25.710
A while ago renovations of a building that sort that's never been renovated are horribly expensive. Even the Eccles building that has had some renovation over the years still needs new, I think you know, air conditioning and heating, and all sorts of systems repair. These are much more expensive renovations than the kind of renovation that occurred, say, for the Reagan building. Which is a building that's gotten some attention in the context of these renovations. But it was built originally in 1999, and, as you can imagine, would be much less costly to renovate...
Unfortunately, some of the language in the original designs refers to things that maybe the choice of words was not the best, and there's a lot of confusion, for instance, around putting green roofs which are now standard in building practices on the roofs of these buildings for water runoff and other ecological issues versus something called a vegetated roof which is actually not a roof. It's on the street level, but it happens to be the street above a parking garage that's going in. And it's quite costly because you have to put plant material there. So, these are the kinds of things that everybody's arguing about, and the details, I think, are probably going to be lost on the public. What the public's going to see is, gee! This is really expensive. Well, you know, and maybe it was mishandled. At least that's the suggestion that's out there by Mr. Vought.
A lot of money and bad optics 00:09:21.630
A lot of money. It's a lot of money, no question. And it's being, you know, it's at a time when the Fed is paying more in interest on the reserve accounts that banks have at the fed than it is earning on the securities holdings. And so it's been running a deficit position, or what the fed calls a deferred asset position since September 2022. So the two things don't go well together in the current environment. I think I think the optics of it aren't great.
Criticism out of the blue 00:10:20.080
So, it's hard to see it completely fading away right now. Given that the Fed still has to supply answers to these questions, and then, presumably there's going to be a lot more discussion. After that he allegation seems to be that he lied in his testimony to Congress. What I saw was that maybe he wasn't quite up on all the details. He didn't have it right at his fingertips. He didn't realize he was going to get grilled on this issue. The Fed, you know. It's not pertinent to monetary policy. It's been going on for a long time. There are a lot of documents in the public domain. There was a lot of opportunity for people to comment on this earlier I think that the Fed has recently posted a set of FAQs. That are very comprehensive and good. In describing the process, it followed what it's legally required to do versus the extensive outreach that it did with a variety of stakeholders, and I think, as they face cost overruns. In some aspects of this they pared back on other things.
The Fed in a very bad spot 00:11:38.920
I hope it does. You know, I think, that the best we can hope for is that Secretary Bessent can prevail and enforce on the President. And you also saw that Jamie Dimon came out making a statement about this as well. You know how extraordinarily important it is that the Fed remain an independent institution for setting monetary policy. And even if you can find a way to fire the guy not related to that ultimately, that's what you're after, and it's just, you know, a horrible situation for institutional integrity.
